from the trolls-strike-again dept

Techdirt recently wrote about the ever-growing flood of patents being granted by the USPTO. As we've emphasized, more patents do not mean more innovation; nor do they necessarily lead to greater overall benefits for business. That's clear in an important new paper from a team including James Bessen, whose work has been mentioned here severaltimesbefore. It builds on the approach described in the 2008 book "Patent Failure" by James Bessen and Michael Meurer, and seeks to estimate both the private costs and private benefits accruing from patents in the US during the years 1984 to 2009. Here's how the costs are obtained:

We obtain lower bound estimates of the private costs of patent litigation by performing stock market event studies around the dates of lawsuit filings. This approach provides estimates of total cost that are greater than direct legal costs and include the costs of lost business, the costs of management diversion, and anything else that reduces the wealth of a firm as the result of defending a patent lawsuit.

As for the benefits, these include:

upper bound estimates for patent rents, the stream of additional profits that firms gain from patenting, including gains from strategic uses of patents.

As the paper explains, this produced the following results:

We have direct aggregate litigation cost and aggregate rent estimates for 1984-2002. During this period, we estimate about $240 billion in private costs and about $195 billion in private benefits. Hence, private costs exceed private benefits by about 24%. Assuming average growth in private benefits during 2002-09, we estimate about $385 billion for 1984-2009. Private costs exceed private benefits by about 29% over this longer period.

One estimate by the researchers puts the total costs at about $538 billion, while another obtains an even more eye-watering $1.49 trillion. The latter figure is consistent with previous work from Bessen, done with Michael Meurer and Jennifer Ford, which suggested that patent trolls -- or "Non-Practicing Entities (NPE)" -- are alone responsible for $500 billion of costs to US companies.

The new study notes how the patent landscape has changed in recent years:

we also identify rapid growth in NPE lawsuits, in lawsuits that include a patent in the Computers/Communications technological area, and in lawsuits brought against alleged infringers in the non-manufacturing, software and telecommunications industries.

While patent stocks have increased at about 6% per year, the values of patents and the associated rents per patent have not changed significantly. The result is a widening gap between the private costs of patents and the private benefits received by publicly listed firms. ... the upward trend in private costs is far lower if we restrict attention just to cases where a practicing entity (PE) files suit. Indeed, without NPE cases, aggregate private benefits would likely exceed aggregate private costs in the years since 2002.

From this we see that one of the key problems that needs fixing in the US patent system is the parasitical behavior of NPEs. Pity that, once more, it looks like this isn't going to happen.

from the profits-before-people dept

As we draw near to the conclusion of TAFTA/TTIP's first year of negotiations, the detailed differences are starting to emerge between the US and EU. But one thing they both take for granted is that it's a good idea. "Good" in this context is essentially about money: the argument is that concluding a trade deal between the US and EU will boost both their economies, increase companies' profits, create employment and generally make people better off. Of course, since all of those are in the future, the only way to justify those kind of claims is to model the likely effects of TTIP on the various economies -- of the US, EU and rest of the world.

That's precisely what a study entitled "Reducing Transatlantic Barriers to Trade and Investment; An Economic Assessment" aimed to do (pdf). Although it's not the only study, it's indubitably the most quoted -- its figures crop up in most articles about the benefits of TAFTA/TTIP. That's largely because it was paid for by the European Commission, and therefore forms the "official" predictions of the benefits that are likely to flow from the agreement:

An ambitious and comprehensive transatlantic trade and investment agreement could bring significant economic gains as a whole for the EU (€119/$165 billion a year) and US (€95/$131 billion a year). This translates to an extra €545/$750 in disposable income each year for a family of 4 in the EU, on average, and €655/$910.

Usually, those figures are repeated without further comment or analysis. That's unfortunate, because there are a number of important assumptions behind them. For example, the use of the phrase "ambitious and comprehensive" is no mere rhetorical flourish: it refers to the most optimistic scenario considered in the study -- in other words, the best-case outcome. Significantly, it not only assumes that all remaining tariffs will be removed -- since these are already low (around 4%), the benefit from doing so is slight -- but also many "non-tariff barriers", economist-speak for regulations and standards. Of course, what industry regards as "barriers", citizens may see more as protections.

The other fact that is almost never mentioned is that the Commission's figures quoted above all refer to 2027, and are the predicted gains from TAFTA/TTIP after it has been in place for 10 years. Leaving aside the difficulty of predicting the US and EU economies in 2027, it also means that the claimed increases in GDP -- 0.39% for the US, and 0.48% for the EU -- are cumulative gains over ten years, and amount to less than 0.05% extra GDP added per year.

Those figures not only refer to the "ambitious and comprehensive" scenario -- in other words, they are an upper bound on what is likely to be obtained -- but also fail to take into account key costs associated with the changes that TAFTA/TTIP would bring about. It's perhaps not surprising that the European Commission's own analysis does not include these -- after all, they reduce the already-small benefits yet further. But clearly, in considering whether to proceed with TTIP, politicians and the public need to have the full picture, and that includes the likely costs as well as the likely benefits.

Fortunately, estimates for those costs have now been produced in some new research. It has been commissioned by the Confederal Group of the European United Left/Nordic Green Left (GUE/NGL) political group in the European Parliament. That group has an obvious political agenda, but then so does the European Commission. What's important is to have a range of analyses of the benefits and costs of TAFTA/TTIP so as to be able to form an overall, independent opinion drawing on them all.

All of the four scrutinized studies report small, but positive effects on GDP, trade flows and real wages in the EU. GDP and real wage increases are however estimated by most studies to range from 0.3 to 1.3 %, even in the most optimistic liberalization scenarios. These changes refer to a level change within 10 to 20 years (!), annual GDP growth during this transition period would thus amount to 0.03 to 0.13 % at most.

That confirms that the very low GDP boost from TTIP, as predicted by the European Commission's study, is also a feature of the others. That's interesting for economists, but for non-specialists the new report's chief virtue is that for the first time it estimates the likely costs of TTIP. It points out that there are several major classes of these, largely ignored in the four studies considered:

Adjustment costs are mostly neglected or downplayed in the TTIP studies. This refers in particular to macroeconomic adjustment costs, which can come in the form of (i) changes to the current account balance, (ii) losses to public revenues, and (iii) changes to the level of unemployment.

These are costs associated with the changes brought about by TAFTA/TTIP. For example, removing tariff barriers necessarily reduces the income received by governments; the GUE/NGL study considers this in various scenarios, and comes up with a cost over 10 years of around €30/$40 bn for the EU economy. Costs are not calculated for the US, unfortunately, but it is likely that a similar figure would apply there too.

There are also significant labor adjustment costs, as some industries take on new workers, while others make them redundant. The report estimates these at around €10/$14 bn over the first ten years of TTIP. There will also be concomitant losses as a result of lower income tax and social security contributions from those who lose their jobs -- another €7/$10 bn.

That makes a total of €47/$64 bn. On top of that, there are two other important classes of costs. One is those arising out of corporate sovereignty payments. These can reach billions of euros/dollars per award, and are likely to become common given that there are 75,000 companies that could use an ISDS chapter in TTIP to sue the US or EU. The amount potentially involved is hard to quantify at this stage, as are the associated "social costs" of removing non-tariff barriers:

the elimination of [non-tariff barriers] will result in a potential welfare loss to society, in so far as this elimination threatens public policy goals (e.g. consumer safety, public health, environmental safety), which are not taken care of by some other measure or policy. Though subject to considerable insecurity, these types of adjustment costs might be substantial, and require careful case-by-case analysis. As we will see in the following, although the social costs of regulatory change are of particular relevance for the analysis of TTIP because of its emphasis of regulation issues, they have not been dealt with properly by the four scrutinized TTIP studies.

In other words, the cost of removing or harmonizing regulations and standards is not fully included in the calculation of whether TAFTA/TTIP is worth pursuing. Once again, that reveals that TTIP is currently seen purely through the optic of business -- whether profits are increased, not whether society must pay a corresponding, or even higher, price to make that possible.

While some will doubtless argue about the details of the new GUE/NGL analysis, it has the valuable function of reminding us that TAFTA/TTIP is not just about corporate profits, but also concerns the 800 million people who make up the citizenry of the US and EU. Until they are included in the equation, and their potential losses and gains factored in, any claims about TTIP's "benefits" -- even the tiny ones that the European Commission's analysis comes up with in its "ambitious and comprehensive" agreement -- must be regarded as simplistic, one-sided and incomplete.

from the interesting-book,-questionable-premise dept

As regular readers here on Techdirt will know, I've been talking about the importance of understanding what happens to economic equations when the marginal cost of something is zero for over 15 years already. It's a very common theme around here. One of my complaints has been that those who came out of an economic world viewpoint in which economics is entirely about dealing with the efficient allocation of scarce resources, tend to fall into a weird intellectual black hole when they try to put a zero in the equation. But I've long argued that this is the wrong way to look at things. The basic equations still work fine, it's just that you have to recognize the flip side of zero is infinity. When you have a zero marginal cost item, you are creating an infinite good -- a resource that can never run out. When you begin to realize that you have a new form of resources -- inputs in economic terms -- suddenly you realize that you're massively expanding the pie, allowing incredible new things to be created from that limitless pool of resources. That's powerful stuff.

So, as you can imagine, I was excited when the publisher of Jeremy Rifkin's new book, The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism, reached out to send me a promo copy a few weeks ago. I am only halfway through it, so I'll probably write more about it when it's done, and there's an awful lot of really interesting examples and profound thinking going on. So I'm really enjoying the basic part of it. However, there's one aspect of the book that I have trouble with, and it's exemplified in Rifkin's op-ed in the NY Times a few weeks ago, called The Rise of Anti-Capitalism. You can probably already suspect the problem I'm seeing, based on the title. The explanation of zero marginal cost and how more and more of our economy is heading there is spot on. And, as we've been noting for over a decade as well, this goes way, way beyond just "content" like music and movies. It's going to impact nearly every important industry in our lives:

The first inkling of the paradox came in 1999 when Napster, the music service, developed a network enabling millions of people to share music without paying the producers and artists, wreaking havoc on the music industry. Similar phenomena went on to severely disrupt the newspaper and book publishing industries. Consumers began sharing their own information and entertainment, via videos, audio and text, nearly free, bypassing the traditional markets altogether.

The huge reduction in marginal cost shook those industries and is now beginning to reshape energy, manufacturing and education. Although the fixed costs of solar and wind technology are somewhat pricey, the cost of capturing each unit of energy beyond that is low. This phenomenon has even penetrated the manufacturing sector. Thousands of hobbyists are already making their own products using 3-D printers, open-source software and recycled plastic as feedstock, at near zero marginal cost. Meanwhile, more than six million students are enrolled in free massive open online courses, the content of which is distributed at near zero marginal cost.

Frankly, I think the power of zero marginal cost goods -- or, as I prefer to call them, infinite goods -- is almost entirely ignored in energy, manufacturing and education (and, importantly, also in healthcare and finance). So it's certainly encouraging to see Rifkin highlight where this is all heading. Where I run into trouble, however, is his belief that this then leads to "the end of capitalism" or "anti-capitalism." To be clear, he explains how what comes out of this, a more collaborative society, will be a great thing. And, again, there's some agreement there. I just think that it's still very much capitalism. Capitalism does not mean that collaboration does not happen. In fact, collaboration is a key part of a well-functioning capitalist society. Ronald Coase famously laid out his theory of the firm in 1937, which explains how transaction costs are a key element in leading people to create long term collaboration. A zero marginal cost world will change the nature of those transaction costs, and will certainly change the nature of collaboration and companies, but it's not anti-capitalist. It's actually more exactly capitalist, where collaboration takes place with more transparency and more information. Those who believe that collaboration is anti-capitalist tend to misunderstand capitalism -- either as extremist Randian Objectivists, or those so opposed to capitalism, often based on believing capitalism is what Randian Objectivists say it is.

Take, for example, this aspect of Rifkin's argument in the NY Times piece:

THE unresolved question is, how will this economy of the future function when millions of people can make and share goods and services nearly free? The answer lies in the civil society, which consists of nonprofit organizations that attend to the things in life we make and share as a community. In dollar terms, the world of nonprofits is a powerful force. Nonprofit revenues grew at a robust rate of 41 percent — after adjusting for inflation — from 2000 to 2010, more than doubling the growth of gross domestic product, which increased by 16.4 percent during the same period. In 2012, the nonprofit sector in the United States accounted for 5.5 percent of G.D.P.

[....]

This collaborative rather than capitalistic approach is about shared access rather than private ownership. For example, 1.7 million people globally are members of car-sharing services. A recent survey found that the number of vehicles owned by car-sharing participants decreased by half after joining the service, with members preferring access over ownership. Millions of people are using social media sites, redistribution networks, rentals and cooperatives to share not only cars but also homes, clothes, tools, toys and other items at low or near zero marginal cost. The sharing economy had projected revenues of $3.5 billion in 2013.

Except, when you look, the most successful and disruptive examples of this "collaborative" approach are not non-profits or civil society, but rather perfectly capitalist companies, that have actually unlocked tremendous potential for revenue not just for themselves, but their users. Things like AirBnB, Uber, Lyrt, Sidecar, FlightCar, RelayRides, Zaarly, LendingClub, AirTasker, Kickstarter, LiquidSpace and many, many more are disrupting all sorts of industries, but doing so in ways that are actually about the more efficient use of resources, unlocking potential that had previously been locked up (often because the transaction costs were too high). But they're not anti-capitalistic at all. They're making capitalism much better. They're helping to move away from power being held by just a few large companies, towards ones where individuals have more power directly.

These aren't non-profits or civil society creating these disruptions, and it seems odd for Rifkin to imply that's what's happening. That's not to knock non-profit organizations or civil society groups -- both of which do great things in many cases. But it conflates a variety of different issues to argue that the response to a zero marginal cost society and infinite goods is that non-profits and civil society "take up the slack." Instead, what we are seeing is that new forms of (very capitalist) companies are forming. They're disruptive -- but disruptive in a good way. They're often about providing more economic freedom and power out to users, such that the transactions are actually beneficial to all players, rather than having a few large companies hoarding the power in the middle.

But having companies hoard power has never been true capitalism in the first place. It's always been the problem that occurs when you have transaction costs that are too high, sometimes driven through political and regulatory capture, allowing certain firms to gain monopoly or oligopolistic control over certain markets, allowing them to create economic friction, increase transaction costs, and keep most of the value created, rather than distributing it to the end points. However, the new disruptive players in the market are often reversing that trend. They're increasing trust, decreasing transaction costs, spreading much of the value to the end points, and simply taking a small cut of the transaction along the way. That's not anti-capitalist, or the "end of capitalism" -- it's about a better recognition of what true capitalism is supposed to be about: more efficient transactions, with minimal friction, where all parties benefit from the transaction.

So there's plenty that I find compelling in Rifkin's book and theories, but I think that he makes a leap too far in arguing that it somehow goes against capitalism, or that civil society and non-profits are somehow "the solution" to a problem that's not clearly a problem.

from the it's-not-about-free-trade dept

Late last year, we were dismayed by a Paul Krugman opinion piece in the NY Times in which he judged the TPP based on how it might impact free trade, saying he didn't understand why people were so upset about it. After lots of people called him out on that, including other economists who highlighted that the problems of TPP have little to do with "free trade" but with exporting questionable regulations and giving up corporate sovereignty, Krugman admitted to knowing little of the details and promising to spend more time reviewing them.

He's now done so and put forth a revised opinion on the TPP, in which he more or less admits that it's not a very good agreement. He doesn't think it's horrible, just like he didn't think it was wonderful before. He basically shifted from lukewarm support to lukewarm disapproval of it. However, at least he now recognizes that it's not about trade, but about helping out a few big companies:

What the T.P.P. would do, however, is increase the ability of certain corporations to assert control over intellectual property. Again, think drug patents and movie rights.

Is this a good thing from a global point of view? Doubtful. The kind of property rights we’re talking about here can alternatively be described as legal monopolies. True, temporary monopolies are, in fact, how we reward new ideas; but arguing that we need even more monopolization is very dubious — and has nothing at all to do with classical arguments for free trade.

Now, the corporations benefiting from enhanced control over intellectual property would often be American. But this doesn’t mean that the T.P.P. is in our national interest. What’s good for Big Pharma is by no means always good for America.

He then wonders why the Obama administration is so gung ho on the deal, and thinks they've been sold a bill of goods, believing the bill must be good because it has been labeled as a free trade agreement, with no one bothering to really think through the details.

So what I wonder is why the president is pushing the T.P.P. at all. The economic case is weak, at best, and his own party doesn’t like it. Why waste time and political capital on this project?

My guess is that we’re looking at a combination of Beltway conventional wisdom — Very Serious People always support entitlement cuts and trade deals — and officials caught in a 1990s time warp, still living in the days when New Democrats tried to prove that they weren’t old-style liberals by going all in for globalization. Whatever the motivations, however, the push for T.P.P. seems almost weirdly out of touch with both economic and political reality.

While I think Krugman underplays the potential downsides of a TPP agreement, at the very least his assessment this time actually involved taking the time to look at what's actually happening. His initial assessment was much more like what he now accuses TPP supporters of doing: just taking conventional Beltway wisdom, combined with a 1990s time warp.

from the economics-in-action dept

One of the biggest problems in trying to fix our insane and out of control healthcare system is the fact that the entire system has totally screwed up economics. The incentive structures are a disaster. The deeper you look at healthcare economics, the more horrific it is. Now, there are some very legitimate reasons how it ended up this way, because there's a strong argument that a purely "free market" healthcare system leads to very poor healthcare for many people who cannot afford it, and that basic healthcare is something that should be provided much more widely both because of basic human compassion and common sense, but also because there are carryover effects to an unhealthy population that effect us all broadly.

But, when you set up a system that has the incentives totally screwed up, what you end up with is what we have: a system where everything is insanely expensive for no other reason than it can be, and where the quality of healthcare is simply not that good, because there's no incentive to make it that way. Instead, there's incentives to simply add up bills as high as possible, with doctors ordering every test imaginable, and focusing on doing more, not doing what's best.

The folks over at Planet Money have an interesting podcast about some pilot programs that have come about because of Obamacare, that seek to realign the basic incentives of doctors to treat patients in the best way, rather than piling as many charges on them as possible. No matter what you think about everything else in Obamacare, it seems like these little-discussed pilot programs are an unquestionable step in the right direction.

In the Planet Money podcast, they talk about one simple way that the pilot program is having an almost immediate effect: by paying doctors a lump sum for overall treatment of a condition, and actually dinging them for errors, rather than rewarding them by allowing them to add more fees for fixing those problems, significantly fewer problems occur. The program also goes further in including the shocking idea of giving doctors feedback on how they're doing, using actual data, rather than letting them do whatever they want without consequences.

In theory, you'd hope that doctors are always seeking to do what's best for the patients, rather than what earns the most money, but it seems clear in practice that when doctors are given a little incentive to do their job better, rather than just do more, they actually do, in fact, do their job better, meaning that not only are people healthier, but the cost of the healthcare goes down. More of that, please.

By gathering over 100,000 signatures -- which they delivered last Friday along with 8 million 5-cent coins representing the country's population -- activists have secured a vote by Switzerland's parliament on an audacious proposal: providing a basic monthly income of about $2,800 U.S. dollars to each adult in the country.

As the article explains, that $2,800 is unconditional:

If you're rich you get it, if you're poor you get. If you're a good person you get it, if you're a bad person you get it. And it does not depend on you doing anything other than making whatever effort is involved to collect the money.

The rest of the post is a great discussion with John Schmitt, a senior economist at the Center for Economic and Policy Research, who explores this idea from various angles. The whole thing is well-worth reading, but I think one section in particular will be of interest to Techdirt readers:

So if we were a very rich world, which I think we are to a certain degree, [universal basic income of the kind being discussed in Switzerland] would be a remarkable way to make sure that people could maximize their ability to express themselves but also maximize their ability to participate in the communities that they live in in a full way. Stay home and take care of kids if that's what you want to do. Take care of your parents when they're old and sick.

This feeds into discussions about how creators could live and thrive in a world where it was legal to share copies of their work. A society that provided them -- and everyone -- with a basic wage would not need to rehearse today's sterile arguments about piracy. Artists would have the option of living on the basic wage while they created, or of making more money by building on the fact that their work is freely available, as Techdirt has advocated. Some might dismiss this as a utopian dream, but as Schmitt points out, it's not:

People sometimes refer to this as a kind of "Star Trek" economy -- you just said, "Replicator, make me a ham sandwich." There wasn't any social conflict around production and consumption. And that, I think, is that kind of ideal in which this kind of a thing could play out. We are probably there in terms of the economics. We are very, very wealthy -- we could afford to do this. But we are not there in terms of the politics.

from the outdated-understanding-of-economics dept

The person who was going to do this week's Techdirt "favorites of the week" post was unable to complete it in time, so instead, with the latest TPP negotiations starting up, I figured I'd post some thoughts on the USTR's view of the world.

Over the last few weeks, since the draft of the TPP IP chapter leaked, I've been puzzling over just why the USTR appears to be actively working against the interests of the American people, jobs, innovation and the economy with the proposal. Frankly, the USTR's extreme position makes no sense at all. Yes, the USTR is heavily influenced by patent and copyright maximalists that it placed on the Industry Trade Advisory Committees (ITACs) it relies on for input on its negotiating position. Yes, there's a tremendous revolving door between maximalist lobbyists and the USTR. Yes, the main guy negotiating this part of the agreement is a long term maximalist extremist who can't even comprehend the idea that locking up information and knowledge might be a bad thing.

But it's felt like there's something more. The USTR has been so incredibly obnoxiously dismissive of the idea that these are bad ideas. I'm beginning to think that, while all of the above are a part of it, a much bigger issue is that they simply come at the issue from a historical, debunked and no longer relevant understanding of how economics and economic growth works. That is, the USTR seems to think in the most narrowest of ways that "what's good for big US companies is good for the US economy" -- a view that was popular in the 1950s but has never made much sense. It's the crony capitalism view of the economy that nearly anyone with any experience in economics knows is bunk. They're taking a zero sum view of the world when the world is anything but zero sum, especially when it comes to information and knowledge. It also completely ignores the nature of disruptive innovation and the importance of allowing new innovations to flourish, and companies who can't keep up to die out. Instead, the USTR seems to think that protecting the companies who aren't innovating is its job. That's dangerous and harmful.

The USTR simply doesn't care at all about what the various public interest groups are telling the USTR about the insanity of these proposals because it thinks that those groups are anti-corporation and anti-growth. But that's outdated and, frankly, wrong thinking. While it may be true of some of the groups, many who actually understand these issues recognize that in the world we live in today, the path to economic growth and innovation is to increase knowledge and information sharing and to work together with consumers to benefit both. But the USTR views the world as "corporations vs. the public." And it's firmly on the side of "the corporations." But that's not the way the world works. It's a very last-century view of the world (and wasn't even accurate then).

Today, companies succeed by treating the public right, aligning interests and building products and services that make people better off, not to fuck them over. That is: if you want innovation to flow and the economy to grow, the USTR should be focusing on an agreement that serves the best needs of the public, by lowering the barriers to innovation and information sharing. Instead, it's doing the exact opposite -- raising trade barriers to help a few industries that don't want to adapt and embrace the way the world works in this information era.

The next great innovative companies come out of a world where giving the public exactly what it wants is key, and part of that is an openness and transparency that brings those consumers into the process. But the USTR is supporting the 1950s vision of giant monolithic companies deciding what the public wants, and fighting any attempt to actually work with the public.

The end result is that the USTR is basically setting a trade agreement with a 1950s manufacturing agenda in a twenty-first century information age world. The end result is going to be a complete and utter disaster for the US economy, innovation, jobs and the American public -- not to mention free expression and access to medicines. We've seen the government do braindead things in the past, but the way the USTR has handled the TPP negotiations appears to be one of the most clueless efforts by US government officials ever. Their entire approach is wrong and dangerous -- and they don't even seem to have the slightest clue of what they're about to do to the economy and innovation. What's good for a few giant companies isn't what's best for the American public, jobs or the American economy. And it's downright frightening that the people negotiating an agreement that is going to have a huge impact on all of those things don't seem to understand the basics beyond an outdated view from 70 years ago...

from the what-was-the-benefit-again? dept

A couple of months ago, we reported on some interesting research into the reality of US trade agreements, in contrast to the rosy pictures always painted when they are being sold to the public by politicians. In particular, it turned out that far from boosting US exports and creating more jobs, both the North American Free Trade Agreement (NAFTA) and KORUS, the free trade agreement with South Korea, actually did the opposite -- increasing the US trade deficit with those countries, and destroying hundreds of thousands of American jobs.

But of course bare economic statistics don't capture the full effect of free trade agreements. For example, there is also the environmental impact to consider. An interesting press release from the Sierra Club reports on a meeting held to consider that aspect. It turns out that things look as bad there as they do on the economic front:

"Nearly 20 years into NAFTA and the evidence is in," said Ilana Solomon, director of the Sierra Club’s Responsible Trade Program. "NAFTA led to an expansion of deforestation and unsustainable water use in order to support export-oriented agriculture. It gave massive rights to corporations to challenge environmental and climate safeguards in private trade tribunals. It expanded exports in dirty fossil fuels in a time when we should be moving beyond these outdated fuels and investing in clean energy. Governments must take a page out of the history books and stop negotiating trade pacts that gut protections for our air, water, land, workers, and communities."

That last comment is a clear reference to TPP, but applies equally to TAFTA/TTIP. Both of these are likely to include investor-state dispute settlement (ISDS) measures that allow companies to sue entire nations for alleged "expropriation" of future profits in the "private tribunals" referred to above. One of the ways that governments can be accused of doing that is by strengthening safeguards for the environment, since that often has the knock-on effect of increasing costs for businesses, and thus reducing their future profits. Companies then try to claim ISDS provisions in trade agreements give them the "right" to sue for compensation -- Techdirt recently wrote about a case involving the Canadian province of Quebec.

"I've seen the letters from the New York and DC law firms coming up to the Canadian government on virtually every new environmental regulation and proposition in the last five years. They involved dry-cleaning chemicals, pharmaceuticals, pesticides, patent law. Virtually all of the new initiatives were targeted and most of them never saw the light of day."

What this means in practice is that ISDS clauses in major US trade agreements currently being negotiated are likely to have the same negative effects on the environment as NAFTA, but on a much greater scale. That's because they involve far larger trade blocs, and recourse to ISDS tribunals has increased greatly in recent years, adding to the credibility of threats to use them unless plans for more stringent environmental policies are dumped. So alongside the dubious economic claims being made for them, which are undermined by the failure of both NAFTA and KORUS to produce the predicted exports or jobs, we can now add the hidden environmental damage as yet another reason to call into question the alleged benefits of both TPP and TAFTA/TTIP.

from the ups-and-downs dept

For years we've discussed the ridiculousness of ebook pricing, where some publishers seem to think that sky high prices for ebooks (often higher than physical copies) makes sense, despite the lack of printing, packaging, shipping and inventory costs. And, of course, we won't even get into the question of the price fixing debacle. Art Brodsky recently wrote a fascinating piece over at Wired about how ebook pricing is an "abomination," because it's designed to price people out of reading. He points out that we should think more about ebooks like we think about apps, since that's a much more direct comparison than "books." And then he gets into a discussion of how publishers are going crazy with their library pricing:

Take the example of J.K. Rowling’s pseudonymous book, Cuckoo’s Calling. For the physical book, libraries would pay $14.40 from book distributor Baker & Taylor — close to the consumer price of $15.49 from Barnes & Noble and of $15.19 from Amazon. But even though the ebook will cost consumers $6.50 on Amazon and Barnes & Noble, libraries would pay $78 (through library ebook distributors Overdrive and 3M) for the same thing.

Somehow the “e” in ebooks changes the pricing game, and drastically. How else does one explain libraries paying a $0.79 to $1.09 difference for a physical book to paying a difference of $71.50 just because it’s the electronic version? It’s not like being digital makes a difference for when and how they can lend it out.

In another wrinkle: Random House jacked up its ebook prices to libraries 300 percent last year, and HarperCollins limits the number of check-outs per ebook. This means libraries have to lease another “copy” when they reach a certain threshold … as if the ebook had died or something. In fact, that’s the problem some authors have with ebooks — not just that they earn less money on them, but that “They never degrade. They are perpetual. That harms writers directly,” as historian and novelist David O. Stewart has observed.

As Brodsky notes, this whole situation is ridiculous, and it harms pretty much everyone. Also, it seems to be in direct contrast with others, even within those very same publishers, who realize that crazy high prices for ebooks are a really bad idea. You may recall Rob Reid, the author of the comic sci-fi novel Year Zero. If you don't remember, it's the story of a world in which aliens want to destroy the earth to avoid having to pay all the money in the universe for a prolonged bout of copyright infringement, thanks to their love of Earth music, which they listened to without realizing the copyright implications. Last year, we published an excerpt of the book along with a fun video conversation between Rob and myself.

This week, Rob has a really interesting blog post about how his publisher, Random House, (yes the same one mentioned above for jacking up its library rates) is running an experiment by offering the ebook for his novel at $0.99, and he rightly applauds this decision to embrace and experiment with prices like that, rather than screaming about how low prices "devalue" the book. After saying "hats off to Random House for testing out pricing tactics that some would view as kamikaze lunacy," he compares how publishers are willing to do this with how the record labels acted back when Rob ran one of the earliest online music services (which became Rhapsody):

For years, we pleaded with the major labels to at least experiment with selling downloads for 99¢ a song. We were always told that this would “devalue” music. As if the only way to properly honor that one Chumbawumba song (yes, it was that long ago…) was to charge $15.99 to get it glued to eleven other songs in a full-length CD. Wrong. What truly devalued music was requiring the downloading public to pirate it rather than purchase it for five long years.

He further notes that while some wish to blame "piracy" for the problems the industry faces, the real problem is the industry responding incorrectly to that new digital world:

A convenient fiction that still makes the rounds blames music’s gruesome decade on Napster-abetted piracy. This is like saying that the outsiders commonly called Barbarians caused Rome’s collapse. Rome conquered the Samnites, Carthage, Hellenist empires, and countless other well-oiled foes. But Rome ultimately fell because it reacted to the Barbarian threat in wholly self-destructive ways – not because the mere existence of Barbarians magically doomed history’s greatest empire.

So, indeed, it's great to see Random House willing to experiment with $1 ebooks -- and it could be quite a successful experiment. Last year, we wrote about how Paulo Coelho had tremendous success when his publisher, Harper Collins, agreed to sell his ebooks for $0.99 as well, leading to a massive jump in sales. This isn't a guarantee that people will pay that amount, obviously, or that such an experiment is a sure-fire success. But it is at least somewhat encouraging that these publishers are willing to experiment on that front. Now, if they weren't so damn afraid of those crazy "public libraries"....

from the lies,-damned-lies,-and-statistics dept

We've noted before attempts to inflate the importance of copyright, patents and trademarks by including a bunch of other sectors that are only tangentially related to them when it comes to totting up their economic impact. For example, last year Mike wrote about a joint Department of Commerce/US Patent and Trademark Office "study" that included 2.5 million grocery store jobs in its definition of "IP-intensive" industries.

On September 30, 2013, the European Patent Office (EPO) and the Office for Harmonization in the Internal Market (OHIM) published their own knock off version [of the US study], titled "Intellectual Property Rights intensive industries: contribution to economic performance and employment in Europe", which claimed that 39 percent of total economic activity in the EU is "generated by IPR-intensive industries."

Like the USPTO study, the numbers are intended to mislead rather than inform debate on intellectual property. The following is a quick rundown of some of the employment numbers in the report, for various IP categories.

Designs
For "design intensive industries," the largest employer group, by far, is "Wholesale of clothing and footwear," which is just one of several "wholesale" categories designed as "Design intensive industries."

Patents
For "patent intensive industries," the list of top industries is mostly made up of various manufacturing sectors. "Research and experimental development on biotechnology" is listed as having just 47 thousand EU jobs, out of more than 22 million "patent intensive" jobs in the study.

Copyright
For the copyright industry, the study claims there are over 7,049,405 jobs in the EU. But where are they? Book publishing is listed at 317,150, Sound recording and music publishing activities at 37,750, and Publishing of journals and periodicals just 13,300... Libraries and archives, on the other hand, are listed as a "copyright intensive industry" with 397.800 jobs -- 5.6 percent of all copyright intensive jobs.

The following 11 industries make up more than 55% of all jobs that are considered copyright intensive, even though copyright is only an incidental factor for most of their activities:

Internal Market and Services Commissioner Michel Barnier said: "I am convinced that intellectual property rights play a hugely important role in stimulating innovation and creativity, and I welcome the publication of this study which confirms that the promotion of IPR is a matter of growth and jobs. It will help us to further underpin our evidence-based policy making.

Of course, it does nothing of the sort, because the "evidence" cited here is so misleading as to be worthless. What Barnier really means is that he will continue to push the dogma that intellectual monopolies like patents and copyright are needed to stimulate innovation and creativity, and that he will ignore real evidence to the contrary, falling back instead on easily-debunked work like the present document from the EPO and OHIM.